MicroStrategy Announces Third Quarter 2017 Financial Results

10-26-17

TYSONS CORNER, Va.--(BUSINESS WIRE)--
MicroStrategy® Incorporated (Nasdaq: MSTR), a leading
worldwide provider of enterprise analytics and mobility software, today
announced financial results for the three-month period ended
September 30, 2017 (the third quarter of its 2017 fiscal year).

Third quarter 2017 revenues were $125.2 million versus $129.9 million
for the third quarter of 2016, a 3.6% decrease. Product licenses and
subscription services revenues for the third quarter of 2017 were $29.3
million versus $37.3 million for the third quarter of 2016, a 21.4%
decrease. Product support revenues for the third quarter of 2017 were
$72.9 million versus $72.5 million for the third quarter of 2016, a 0.6%
increase. Other services revenues for the third quarter of 2017 were
$23.0 million versus $20.2 million for the third quarter of 2016, a
14.3% increase. Foreign currency effects had a favorable impact on
revenues for the third quarter of 2017.

Operating expenses for the third quarter of 2017 were $80.2 million
versus $77.0 million for the third quarter of 2016, a 4.3% increase.
MicroStrategy did not capitalize any software development costs during
the third quarter of 2017 or 2016.

Income from operations for the third quarter of 2017 was $20.6 million
versus $30.0 million for the third quarter of 2016. Net income for the
third quarter of 2017 was $17.9 million, or $1.56 per share on a diluted
basis, as compared to net income of $26.6 million, or $2.31 per share on
a diluted basis, for the third quarter of 2016.

Non-GAAP income from operations, which excludes share-based compensation
expense and restructuring costs, was $24.2 million for the third quarter
of 2017 versus $33.4 million for the third quarter of 2016. The tables
at the end of this press release include a reconciliation of income from
operations to non-GAAP income from operations for the three months ended
September 30, 2017 and 2016. An explanation of this non-GAAP measure is
also included under the heading "Non-GAAP Financial Measure" below.

As of September 30, 2017, MicroStrategy had cash and cash equivalents
and short-term investments of $646.1 million, as compared to $589.4
million as of December 31, 2016, an increase of $56.7 million. As of
September 30, 2017, MicroStrategy had 9.4 million shares of class A
common stock and 2.0 million shares of class B common stock outstanding.

Conference Call

MicroStrategy will be discussing its third quarter 2017 financial
results on a conference call today beginning at approximately 5:00 p.m.
EDT. To access the conference call, dial (844) 824-7425 (domestically)
or (716) 220-9429 (internationally) and use conference ID 89717346. A
live webcast and replay of the conference call will be available under
the "Events" section on MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.
The replay will be available beginning approximately two hours after the
call concludes until November 2, 2017 at (855) 859-2056 (domestically)
or (404) 537-3406 (internationally) using the passcode 89717346. An
archived webcast will also be available under the "Events" section on
MicroStrategy's investor relations website at http://ir.microstrategy.com/events.cfm.

In October 2017, MicroStrategy announced the general availability of
MicroStrategy 10.9, the newest feature release to the company's
MicroStrategy 10™ platform. This feature release introduced Dossier™, a
new storybook experience for everyone across the enterprise that makes
it easy to consume, share, and collaborate around analytics. To learn
more about the new features in MicroStrategy 10.9, visit our What's
New in MicroStrategy page.

"MicroStrategy 10.9 represents the biggest leap forward since our
MicroStrategy 10 platform launch and underscores our vision of
delivering ‘Intelligence Everywhere'," said Tim Lang, Senior Executive
Vice President and Chief Technology Officer, MicroStrategy Incorporated.
"We believe collaborative analytics accelerates the velocity of decision
making. That's why we're introducing Dossier, an easier and faster
method of consuming analytics that we believe end users are going to
love. MicroStrategy 10.9 empowers users to do more with their analytics
regardless of their technical skill or role."

Dossier Delivers New Storybook Experience Around Analytics

MicroStrategy 10.9 delivers Dossier, an interactive book of business
which combines relevant analytics into a single place, organized into
chapters and pages. The new streamlined interface goes beyond dashboards
and brings data together in a format that all users recognize and
understand. The new consumer-oriented and browser-based interface offers
end users a modern and interactive means to explore data. Dossier makes
it easy to navigate and share reports and visualizations that matter to
users.

"Assisting customers in improving their businesses through media-centric
analytics insights is a top objective at Imagine, and MicroStrategy 10.9
is instrumental in helping us achieve this goal," said Adam Gotlieb,
Director of Product Management for Global Traffic, Imagine
Communications. "Dossier introduces a new streamlined interface that
goes beyond dashboards and brings key data into a format that users can
understand and use to make better, actionable decisions and identify new
opportunities."

Collaborative Analytics Turbocharges Decision Making

Version 10.9 enables users to collaborate via discussion threads and
real-time comments within the Dossier interface. Anyone who has access
to a dossier through the MicroStrategy Library™ can ask questions,
highlight trends, and share their current filter state with others.
Users who are tagged in a comment can receive real-time notifications
via email, browser banners, page and library alerts, or push
notifications.

The 10.9 release delivers the MicroStrategy Library, a personalized
portal for all users to access their BI content and dossiers. End users
can log in to the MicroStrategy Library to find a list of all dossiers
to which he or she has subscribed or has access. Each dossier in the
library is represented by a customized thumbnail image, making it easy
to visually identify content. Additionally, powerful search options are
available for users to find content quickly. New notifications and
comments made to the user will show up clearly as an alert, so the user
doesn't miss an update. Regardless of what browser or mobile device a
user is on, the MicroStrategy Library is responsive in design and can
automatically resize as needed.

Visual-based Filtering Accelerates Data Exploration

Dossier delivers a completely revamped approach to filtering data. Users
can explore their data with a clean, simple interface and multiple
filter types, including visual filters, advanced qualification filters,
and in-canvas selectors. With visual filters, users can now embed any
MicroStrategy visualization into the filter panel of a dossier,
providing a visual and intuitive way to filter information without
taking up valuable screen real estate.

MicroStrategy 10.9 makes it easier for users to access, analyze, and
operationalize their data. MicroStrategy 10.9 provides business analysts
with more connectors to data sources, easier data preparation, visual
analytics and guided advanced analytics. Analysts can author once and
deploy on multiple devices, without worrying about the target device.

Dossier and Document Certification Maintain Effective Data Governance

A common need for organizations that have invested in self-service
strategies is the ability to ensure that everyone is able to
differentiate content that is tied to certified versus untrustworthy
data. With MicroStrategy 10.9, analysts and data stewards can watermark
content with a ‘certified' stamp. This step offers an easy way to
implement governance across a self-service deployment and makes it clear
for business users which content is tied to trusted data sources.

New Connectivity, Including Enhanced Out-of-the-box Connectors, to
Diverse Types of Data

MicroStrategy 10.9 amplifies existing investments by keeping up with the
latest certifications and providing instant access to nearly any type of
data with out-of-the-box connectors to popular data sources, including
personal spreadsheets, enterprise data warehouses, text files, cloud
sources, and big data systems. With a clean simple interface, analysts
can sort through 80+ data sources to quickly find the source they need.
Version 10.9 delivers live data access for Hadoop Gateway, allowing end
users to get the latest information from HDFS.

In addition, MicroStrategy 10.9 delivers an SDK to build out new
out-of-the-box connectors that help analysts visualize text and
semi-structured data such as Solr, Box, One Drive, Elasticsearch and
many others. These new connectors allow analysts and citizen data
scientists to run queries against semi-structured data, like log files
and text scripts. Data is available to end users in tabular format and
can be readily used to build reports or dossiers. New connectors built
using the Data Connector API are regularly available and can be
downloaded by visiting the MicroStrategy
Community.

MicroStrategy 10.9 enables business users and analysts to visualize and
interact with multi-level or ragged hierarchy reports against MDX
sources, and delivers enhancements with dynamic filtering, persisted
sort order, efficiency improvements, and support for derived attributes
and metrics. Business users can apply mathematical and other
transformational functions, and create derived elements within hierarchy
reports using more complex formulas and calculations.

Offering a vast array of APIs, MicroStrategy 10 is an open platform that
works with larger technology ecosystems and offers easy ways to extend
its capabilities. With MicroStrategy 10.9's new embedding APIs, dossiers
can be easily embedded into third-party applications with the ability to
interact with MicroStrategy content and associated functionality. Users
can slice and dice the data, navigate to different pages and chapters in
the dossier, apply filters, and interact and analyze the data within the
application itself. In addition, single sign-on or guest embedding can
be enabled, so the user can interact with the dossier without having to
log in within the third-party application.

"After testing MicroStrategy 10.9 as an early adopter, we are excited
about the new set of APIs in the release that will make embedding and
integration of MicroStrategy capabilities with applications of our
choice easier," said Praphul Kumar, Senior Director of Product
Management, Genesys. "As we create the world's most powerful, personal
and intelligent customer experiences, MicroStrategy helps us to
democratize those experiences through their rich set of APIs. We use
MicroStrategy APIs to embed real-time and historical information right
into the hands of contact center agents and supervisors so they can view
and analyze that information in any application. MicroStrategy is the
most open platform in the market, and we are excited to build more
data-driven client applications with the new APIs."

Upgrades to MicroStrategy on AWS Strengthen Analytics in the Cloud

MicroStrategy on AWS allows organizations to deploy and manage
enterprise analytics environments through the provisioning console.
MicroStrategy 10.9 adds significant enhancements to its cloud offering,
including single-click hotfix upgrades and the ability to deploy
MicroStrategy into existing Virtual Private Cloud (VPC) accounts. New
deployments will be automatically launched in the latest R4 instances
that are optimized to require less memory. MicroStrategy
customers can deploy MicroStrategy on AWS in data centers in eight
different locations: Northern Virginia, Ohio, Oregon, Ireland,
Frankfurt, London, Sydney, and Tokyo. The MicroStrategy on AWS
provisioning tool is also available in nine different languages:
English, French, Italian, Portuguese, Spanish, Dutch, Japanese, Korean,
and Chinese.

The latest release also introduces various additional enhancements,
including:

Responsive design that makes it easier than ever to build and deploy
analytics across different device types and screen sizes;

New and improved data connectors that allow organizations to access
datasets across different projects in a MicroStrategy deployment.
Version 10.9 also certifies the latest data sources, including Maria
Database 10.x, Apache Hive 2.x, Spark SQL 2.0, and MapR 5.2, and
delivers improvements to data connectors for Presto, Snowflake, and
Amazon Redshift; and

Out-of-the-box connectors for both Solr and Elasticsearch.

Release of MicroStrategy 10.4™ Hotfix 5

Alongside the MicroStrategy 10.9 feature release, MicroStrategy 10.4
Hotfix 5 was made generally available to customers. This hotfix improves
overall product stability and includes over 200 customer-reported
enhancements and fixes across the platform.

Furthermore, this latest update to the MicroStrategy platform release
provides driver and feature parity for relational and big data gateways
with the latest MicroStrategy feature release (10.9). This enables
access to brand-new data sources and provides optimized connectors for
additional data sources — allowing customers to expand and enhance their
existing applications. The latest hotfix (10.4.5) is also available for
MicroStrategy on AWS.

MicroStrategy customers can apply MicroStrategy 10.9 or 10.4.5 to their
analytics environments by downloading the release from the MicroStrategy
download site.

Global Symposium Series Unveiled MicroStrategy 10.9 and Dossier

In October 2017, MicroStrategy announced the locations for its 29
Symposium Series events being held in October and November. Each one-day
event, taking place in cities across North America, Europe, Latin
America, the Middle East and Asia, highlights the latest innovations and
feature enhancements in MicroStrategy 10.9.

"We are thrilled that MicroStrategy 10 was recently named a market
leader in ‘The Forrester Wave: Enterprise BI Platforms With Majority
On-Premises Deployments, Q3 2017'," said Mark Gambill, CMO,
MicroStrategy Incorporated. "However, we're not resting on our laurels.
We continue to innovate and bring exciting new features to market, and
will be showcasing MicroStrategy 10.9 and Dossier at our global
symposia. We invite everyone to join us at these events where
communities of data enthusiasts around the world will learn the latest
in enterprise analytics and mobility, including customer success
stories, new education and service offerings, and exciting new features
they can leverage to accelerate their decision making."

Each symposium kicks off with an executive keynote and live
demonstrations featuring MicroStrategy for machine learning and
voice-driven analytics with Alexa. IT and business users have numerous
opportunities to network, attend workshops, and learn about
MicroStrategy 10 applications from real-world customers. Some of the
customers featured at the Symposium Series include AllianceBernstein,
Bank Rakyat, Falken Tires, and PF Chang's.

Attendees can choose from more than a dozen breakout sessions and
hands-on workshops, and have the opportunity to gain firsthand
experience with Dossier and MicroStrategy Desktop™, our free enterprise
data discovery product. In addition to trying MicroStrategy 10.9's new
features for the first time, workshop attendees can also spin up their
own dedicated cloud environments with MicroStrategy on AWS and learn how
to deploy a secure, collaborative analytics environment without any
hardware or setup costs of their own.

Independent Research Firm Named MicroStrategy a Leader in Enterprise
BI Platforms Report

In September 2017, MicroStrategy announced that Forrester Research, Inc.
cited MicroStrategy as a leader in "The Forrester Wave: Enterprise BI
Platforms With Majority On-Premises Deployments, Q3 2017" report. From a
pool of 15 enterprise BI platform providers offering on-premise
solutions, MicroStrategy was evaluated according to a comprehensive set
of 22 evaluation criteria grouped into three categories: current
offering, strategy, and market presence. Specifically, MicroStrategy
received maximum scores in the focus on BI, full BI stack, cross-product
integration, text mining, and upgrades criteria. To learn more about
MicroStrategy's ratings, download a copy of The Forrester Wave report here.

According to the report, "MicroStrategy continues to address all BI use
cases at scale." The report also stated that MicroStrategy's "core
strength remains a powerful, highly scalable ROLAP, which can optimize
queries beyond DBMS capabilities; perform complex heterogeneous joins
between multiple DBMSes; and support a drill-anywhere capability, which
can reduce the number of siloed reports and dashboards. MicroStrategy
received one of the best scores in our evaluation's ‘clicks to answer'
exercise."

"We are seeing tremendous momentum from customers and partners around
MicroStrategy 10 because it offers a unique value proposition:
enterprise analytics and mobility on one platform," said David Rennyson,
Senior Executive Vice President, Worldwide Sales, MicroStrategy
Incorporated. "Thousands of our customers and partners have come to the
realization that there's nothing else in the market that comes close to
the depth and breadth of MicroStrategy 10's powerful analytics and
mobile capabilities, integrations with leading technology vendors and
open-source tools, and enterprise-class performance and scalability. We
encourage anyone interested in viewing MicroStrategy's ratings to
download The Forrester Wave report today."

In July 2017, MicroStrategy announced it was named a Market Leader and
ranked No. 1 in product capabilities in the BARC
Score Data Discovery Report. The report was based on vendors'
performance in a detailed test case as well as on findings from the
organization's BI Survey, the world's largest independent survey of
business intelligence and performance management users.

"MicroStrategy continues to receive top honors in our BI surveys and
rankings, now demonstrated in our new BARC Score Data Discovery Report.
This is a testament to MicroStrategy's continued focus on product
innovation and its dedication to making solutions that are as
comprehensive as they are intuitive," said Dr. Carsten Bange, Founder
and CEO of BARC.

"MicroStrategy's elite placement is a reflection of our ongoing
commitment to a true enterprise platform and our dedication to
supporting business users in every step of their data discovery
process," said Mark Gambill. "The market for software supporting data
discovery continues to emerge, and MicroStrategy has invested heavily to
meet the growing need for tools that efficiently analyze and explore
data."

Outranking some other large international rivals, MicroStrategy made it
into the Market Leader category. Its ranking in the product capabilities
category further demonstrates excellence and leadership as a highly
scalable enterprise-grade BI platform.

According to the BARC Score Data Discovery Report, "the way
MicroStrategy supports the user during data preparation is the sweet
spot of the solution. The user is presented with relevant functions
based on the current context, and the possible outcome of available
options (e.g. when splitting data) is shown immediately alongside the
existing data. No functions have to be used and the history script
created in the background provides the necessary transparency."

In addition to achieving high ratings in the BARC Score Data Discovery
Report, MicroStrategy also recently achieved high ratings in the large
enterprise BI platforms peer group in the BARC BI Survey 16:

Ranked #1 Cloud BI - BARC BI Survey

Ranked #1 Data Discovery/visualization - BARC BI Survey

Ranked #1 Location Intelligence - BARC BI Survey

Ranked #1 Chosen as standard - BARC BI Survey

Ranked #1 Mobile BI - BARC BI Survey

Non-GAAP Financial Measure

MicroStrategy is providing a supplemental financial measure for income
from continuing operations that excludes the impact of share-based
compensation arrangements and restructuring activities. This financial
measure is not a measurement of financial performance under generally
accepted accounting principles in the United States ("GAAP") and, as a
result, this financial measure may not be comparable to similarly titled
measures of other companies. Management uses this non-GAAP financial
measure internally to help understand, manage and evaluate business
performance and to help make operating decisions. MicroStrategy believes
that this non-GAAP financial measure is also useful to investors and
analysts in comparing its performance across reporting periods on a
consistent basis because it excludes a significant non-cash expense that
MicroStrategy believes is not reflective of its general business
performance and restructuring charges that we believe are not reflective
of ongoing operating results. In addition, accounting for share-based
compensation arrangements requires significant management judgment and
the resulting expense could vary significantly in comparison to other
companies. Therefore, MicroStrategy believes the use of this non-GAAP
financial measure can also facilitate comparison of MicroStrategy's
operating results to those of its competitors.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is a worldwide leader in enterprise
analytics and mobility software. A pioneer in the BI and analytics
space, MicroStrategy delivers innovative software that empowers people
to make better decisions and transform the way they do business. We
provide our enterprise customers with world-class software and expert
services so they can deploy unique intelligence applications. To learn
more, visit MicroStrategy
online, and follow us on Facebook
and Twitter.

MicroStrategy, MicroStrategy 10, MicroStrategy 10.4, MicroStrategy 10.9,
MicroStrategy Desktop, MicroStrategy Library and Dossier are either
trademarks or registered trademarks of MicroStrategy Incorporated in the
United States and certain other countries. Other product and company
names mentioned herein may be the trademarks of their respective owners.

This press release may include statements that may constitute
"forward-looking statements," including estimates of future business
prospects or financial results and statements containing the words
"believe," "estimate," "project," "expect" or similar expressions.
Forward-looking statements inherently involve risks and uncertainties
that could cause actual results of MicroStrategy Incorporated and its
subsidiaries (collectively, the "Company") to differ materially from the
forward-looking statements. Factors that could contribute to such
differences include: the extent and timing of market acceptance of
MicroStrategy's new offerings, including MicroStrategy 10.9; the
Company's ability to recognize revenue or deferred revenue through
delivery of products or satisfactory performance of services; continued
acceptance of the Company's other products in the marketplace;
fluctuations in tax benefits or provisions; the timing of significant
orders; delays in or the inability of the Company to develop or ship new
products; competitive factors; general economic conditions, including
economic uncertainty in the retail industry, in which the Company has a
significant number of customers; currency fluctuations; and other risks
detailed in the Company's registration statements and periodic reports
filed with the Securities and Exchange Commission. By making these
forward-looking statements, the Company undertakes no obligation to
update these statements for revisions or changes after the date of this
release.

MSTR-F

MICROSTRATEGY INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues

Product licenses

$

21,553

$

29,632

$

61,683

$

75,490

Subscription services

7,725

7,639

23,843

22,775

Total product licenses and subscription services

29,278

37,271

85,526

98,265

Product support

72,886

72,460

214,142

212,408

Other services

23,048

20,165

66,730

61,380

Total revenues

125,212

129,896

366,398

372,053

Cost of revenues

Product licenses

1,763

2,370

5,182

6,828

Subscription services

3,592

3,219

10,031

9,667

Total product licenses and subscription services

5,355

5,589

15,213

16,495

Product support

4,218

3,959

13,094

10,919

Other services

14,816

13,387

43,589

42,445

Total cost of revenues

24,389

22,935

71,896

69,859

Gross profit

100,823

106,961

294,502

302,194

Operating expenses

Sales and marketing

41,806

39,169

122,635

113,448

Research and development

19,360

18,069

57,347

54,804

General and administrative

19,082

19,703

58,921

63,014

Restructuring costs

0

12

0

45

Total operating expenses

80,248

76,953

238,903

231,311

Income from operations

20,575

30,008

55,599

70,883

Interest income, net

1,449

507

3,449

1,449

Other expense, net

(1,903

)

(473

)

(6,377

)

(386

)

Income before income taxes

20,121

30,042

52,671

71,946

Provision for income taxes

2,197

3,414

8,804

12,162

Net income

$

17,924

$

26,628

$

43,867

$

59,784

Basic earnings per share (1):

$

1.57

$

2.33

$

3.83

$

5.23

Weighted average shares outstanding used in computing basic earnings
per share

11,447

11,431

11,443

11,422

Diluted earnings per share (1):

$

1.56

$

2.31

$

3.79

$

5.20

Weighted average shares outstanding used in computing diluted
earnings per share

11,499

11,521

11,567

11,503

(1)

Basic and fully diluted earnings per share for class A and class B
common stock are the same.